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SEC Sued Over Delay In Resource Extraction Rule

Sept. 18 — Oxfam America Inc. Sept. 18 filed a lawsuit in the U.S. District Court for the District of Massachusetts to compel the Securities and Exchange Commission to issue a resource extraction disclosure rule.

The commission has failed to finalize a rule more than three years after the expiration of its mandated deadline under Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the relief organization's complaint said.

“The SEC's pattern of delay gives no assurance that it will promulgate a Final Rule, nor even a proposed rule, without the involvement of this Court,” it said.

Statutory Mandate

Section 1504 directs the SEC to require the resource extractive industries to disclose payments made to governments to further the commercial development of oil, natural gas or minerals.

A rule adopted in 2012 by the SEC was invalidated by the U.S. District Court for the District of Columbia last year in response to a lawsuit brought by four trade groups, including the American Petroleum Institute.

In May, the SEC indicated in its regulatory flexibility agenda that it would issue a new proposal under Section 1504 by March 2015.

Emerging Standard

In a press conference to announce the lawsuit, Ian Gary, senior policy manager of Oxfam America's extractive industries program, told reporters that because a global standard for payment transparency has emerged, the SEC “already has most of the information it needs” to promulgate a new rule.

Gary noted, for example, that the EU and Norway have adopted mandatory disclosure laws that mirror the SEC's 2012 regulation, while Canada has committed to passing similar legislation by mid-2015.

Gary added that the U.K. has published draft legislation to implement the EU rules by the end of 2014. By 2016, the EU requirements will be in effect in all 28 member states, he said.

“So in many ways, the SEC has done its work already,” Gary said. The agency now has “additional justification for making” the same choices it made in 2012 “based upon a desire to align” U.S. requirements with those in other countries.

Jonathan Kaufman, legal advocacy coordinator for EarthRights International and co-counsel for Oxfam America, noted that the district court's decision will not impede the SEC from adopting requirements that are similar to what it struck down in 2013.

Weaker Rule?

While it certainly is a possibility that the SEC may issue a final rule weaker than the EU requirements, that would be an “unusual step” given Congress's intention in enacting Section 1504 that the U.S. set a global standard, Kaufman continued. Moreover, a weaker law “would not be in the interests” of the many companies that are covered by both the U.S. and EU requirements, he said.

U.S.-listed resource extractive companies such as BP, Royal Dutch Shell, Total and Statoil also are covered by the EU, Norwegian and Canadian regulations, the Oxfam representatives said.

Oxfam previously sued the SEC in May 2012 to compel the promulgation of the agency's original rule. The group later intervened in support of the SEC in the lawsuit filed by industry groups to challenge the rulemaking.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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